mikeglover

This is my first thread on the forum so please forgive me if i dont follow all the correct protocols. I have lived in Spain for the last 2 years and am trying to decide whether to become a resident now or wait a while. Am i right in thinking that as a resident, i would have to fill in a Spanish income tax return (i have no Spanish earnings) on my uk income (rent and pension) and pay Spanish income tax on these uk earnings with any uk oncome tax paid, being offset against the Spanish tax calculation? Secondly, if this is indeed the case, does this mean that the uk chancellor increasing the uk tax free threshold would have no effect on my overall tax bill as any decrease in uk tax (as a result of the hike in the uk threshold) would simply mean a higher net Spanish tax bill. Finally, can i become a resident in Spain but remain fiscaly resident in the uk for tax purposes and therefore not required to complete a Spanish tax return or be subject to Spanish income tax? Many thanks for any replies that can make the picture a bit clearer. Mike

Rosemary

As Concierge for the Spanish section of BE I would like to say hello and welcome.

BE is a very large expat website, so if you have problems finding your way around we have concierges who will try to direct you. The moderators for the Spanish forums are Mitzyboy and Fred James, moderators are there to ensure that the site runs smoothly within the rules of BE. Problems and complaints should always be addressed to a moderador who will look into the matter and deal with it efficiently and fairly. Our members who post in the Spain Forums are friendly and helpful with a wealth of knowledge of the issues of living in Spain. At the top of the page you will find a quirkily named thread called Free Beer which is full of important and useful information. Hope you enjoy your time participating in the forums.

If you have lived here for 2 years you are classed as resident and should have gained the residencia certificate and been completing tax forms already.

Please let me know if you need any further help.

Rosemary

Fred James

If you spend more than 183 days in Spain in any one calendar year you become tax resident in Spain.

No options - no choice. You then pay Spanish tax on your worldwide income with some exceptions such as a UK government pension and UK rental income.

Your UK state pension and any other pensions will be taxed in Spain. If they are being taxed in the UK you can apply to HMRC to have them paid gross.

You are able to offset tax paid in the UK against any Spanish tax due on the same income but that does not remove the obligation to declare for tax in Spain.

Your UK rental income is taxed in the UK and you are entitled to offset UK tax allowances against that income.

As a Spanish resident you are obliged to complete an annual tax declaration even if your income is low enough to mean that no tax is due. If it is very low - well below the UK state pension then it may not be required.

Failure to complete a Spanish tax return when you are deemed tax resident can incur a significant fine.

You cannot choose where you are tax resident - that is a matter of fact based on where you spend your time.

mikelincs

Please read Fred's reply, he's totally correct on everything, you have already broken the Spanish tax laws by not making declarations, when we lived there, even though we were only getting UK pensions, we filled in a Spanish tax return every year because we had done the research, and knew that we were resident, you don't have a choice about that, and it's nothing to do with citizenship. You should have registered on the padron, and got your residencia certificate as soon as you moved if you knew you would be staying over the 6 months. Living over 183 days a year in any one year in Spain, then you are tax resident, and can't also be tax resident in the UK.

mikeglover

Many thanks for all the replies. After having read quite a few books before i came out here and enquired around the expat community where i live, (ask 10 people, get 10 different answers) it is refreshing to get the same answer from everyone who replied to my thread. I did register for the padron and have imported my uk car into Spain and have Spanish plates on it but ive heard from some sources (not saying they are correct of course) that if someones business interests are in the uk (not employment) then they can be deemed to be fiscally resident in the uk even though they are normaly resident in Spain. A lot of people in my area also seem to be waiting till they reach uk state retirement age before becoming resident otherwise all the money they paid into the uk health system becomes wasted as they no longer qualify for treatment in the uk and cant get treatment in Spain either. On the subject of tax in Spain, i appreciate that the standard reply will probably be - go see an accountant - but it is sometimes better to initially get an idea from peoples experience. In the uk, HMRC look at gross rent and then apply allowable deductions, say A, B, C to arrive at net income and then tax it at the appropriate rate ( after also deducting tax free allowance). Does the Spanish IR allow exactly the same deductions i.e. using the same net income figure, deduct the Spanish tax free allowance, apply the Spanish tax rate and finally deduct the uk tax paid, or are the allowable deductions (A,B,C) different which probably means that i would have to have a Spanish accountant go through all my income and outgoings, repairs, charges etc before arriving at a Spanish net income figure. Sorry about the length of this posting - i promise to keep future ones to no more than 5 lines. Mike

Rosemary

Where in Spain are you living? We used a Gestor not an accountant but ours has a background in banking. Our understanding is that the tax system here is more generous with allowances. Granted we do only have our state and private pensions coming in but we were paying UK tax on this until we informed them that we were fiscal residents in Spain and supplied the relevant forms to them. In Spain we have not paid tax so assume that they have better allowances.

Rosemary

snikpoh

You can actually choose to not pay tax on UK rental income by filling in the necessary paperwork. You then MUST pay tax on that income in Spain.

Use this form here NO tax on UK rental

Mitzyboy

I guess dont listen to people in bars. In addition to what has been said, you have already lost your entitlement to NHS treatment when you are no longer a UK resident. You have to be a UK resident to be entitled to NHS health treatment (it doesnt matter about the fact that you have contributed all your life) , and therefore if people are using it when they no longer live in the UK and are resident here they are in effect doing it fraudulently. The man in the bar will tell you differently of course, but he would be wrong

Hillybilly

That is incorrect advice. The NRLS doesn't exempt you from paying tax on rental income in the UK - that is not its purpose. All it means is that you receive your rent gross without the letting agent or tenant withholding the tax. You still have to make a tax return in the UK and pay any tax due there...until such time as HMRC tell you otherwise. You do NOT have any choice in this!

Rosemary

Unfortunately it looks like this poster has been talking to people who are willing to take the risk of being ill in Spain without having the correct paperwork and entitlements. They seem to presume that they can jump on a plane and go back to the UK for their illegal treatment but this is not possible if you suddenly become ill. I met one couple who were using their EHIC card for a stay in hospital for his cancer which came suddenly and grew rapidly. They kept on saying that they were only visitors and not long term residents but it was obvious because they were very nervous every time they talked to the medics. It is never worth the worry that this adds when you are already worried about your medical outcomes.

Rosemary

Lynn R

Absolutely agree. I came to Spain aged 50 and, after having 2 years' cover in the Spanish state health system based on my UK NI contributions (paid for over 30 years), I am now paying for private health insurance to cover the remaining 14 years until I become eligible for a UK state pension. We are not all prepared to fiddle the system like the OP's acquaintances nor, as Rosemary says, live with the risk of being refused treatment if our status as residents is checked.

Rosemary

In the early stages of my OH´s treatment just after the first operation the surgeon came for his usual daily checks and then proceeded to ask about where we were from in the UK. He wrote this down and then asked where we were born in the UK and wrote that down. Needless to say we started to worry about why he was asking these questions so I took all our legal paperwork into the hospital in case there was further queries. Turns out that my OH´s SIP card had his christian names and surname the wrong way around and we had never noticed. The checks that the surgeon made were to verify that the SIP number matched the paperwork in Valencia (which of course it did). Even though we knew that we were totally legal and above board it did not stop us being anxious.

Rosemary

Rosemary

Anyone who tries to avoid paying tax in the country that they are residing in are liable to be heavily fined because as I understand it ignorance of the law is no defence. My advice to the poster would be to go to a good gestor a.s.a.p. to get things sorted out and to stop listening to the ill informed people in the bars.

Rosemary

Library Ticket

Originally posted by Snikpoh
"You can actually choose to not pay tax on UK rental income by filling in the necessary paperwork. You then MUST pay tax on that income in Spain.

Use this form here NO tax on UK rental"


[QUOTE=Hillybilly;9966503]That is incorrect advice. The NRLS doesn't exempt you from paying tax on rental income in the UK - that is not its purpose. All it means is that you receive your rent gross without the letting agent or tenant withholding the tax. You still have to make a tax return in the UK and pay any tax due there...until such time as HMRC tell you otherwise. You do NOT have any choice in this![/QUO

Para from the NRLS application form below

"Normally a letting agent or tenant deducts tax when paying
rent to a landlord who usually lives outside the UK. This
doesn’t mean that the rent is exempt from UK tax, and we may
ask you to fill in a UK Self Assessment tax return later."

I'm puzzled by the word may. How does this work in practice, even though a letting agent doesn't have to deduct tax I presume they have to report the landlord's income to HMRC? Does the word may apply only to expat landlords who are no longer on the PAYE system?

Both OH and I have government pensions which are taxed in the UK and will continue to be when we move to Spain later this year. I have a state pension which I intend to have paid directly to Spain (and will declare on the Spanish self assessment). Our other incomes will be rental from our UK property and investments/savings in the UK, some of which will be in ISAs.

In our case if we are approved for the NRLS scheme will our rental income tax be recovered by HMRC through our PAYE tax codings or will we be expected to complete a UK self assessment form?

Hillybilly

Unless you are approved for the NRLS scheme, either the agent or the tenant MUST deduct the tax from the rent. It is then up to you to reclaim any tax you may be able to when you make your annual UK tax return.
If you are approved for the NRLS scheme, it is up to you to declare your rental income on your annual UK tax return.
What eventually happened in my case was that after several years of making nil UK tax returns declaring my rental income (i.e. I had no tax to pay) HMRC wrote to me to tell me not to bother to make a tax return any more.